Choice "B" is correct. Gross income includes salary, but it excludes inheritance and proceeds from a lawsuit for physical injuries. Alimony paid is an adjustment from gross income to arrive at Adjusted Gross Income, as follows:
Gross Income:
Salary
$ 50,000
Inheritance
0
Proceeds from physical injury lawsuit
0
Adjustments:
Alimony paid
(10,000)
Adjusted gross income
$ 40,000
Choice "a" is incorrect. Although salary is the only item of taxable gross income on the list, alimony is an allowable adjustment to arrive at adjusted gross income.
Choice "c" is incorrect. This answer choice includes all items of income given and deducts the alimony paid. Inheritance and proceeds from a lawsuit for physical injuries are NOT items of taxable gross income.
Choice "d" is incorrect. This answer choice includes all items of income given and does not deduct the alimony paid. Inheritance and proceeds from a lawsuit for physical injuries are NOT items of taxable gross income, and alimony IS an allowable deduction from gross income.
